One motif frequently employed by advocates of free trade and globalism is the claim that the emergence of the nation-state and industrialization was really just an early stage of globalization, as if all history was building up to the status quo. Related to this idea is the vague notion that “things have changed,” meaning that nationalism is somehow no longer possible.
The Industrial Revolution as Proto-Globalization?
Richard Baldwin in his 2016 book on offshoring, The Great Convergence: Information Technology and the New Globalization, makes the case that the “new globalization” (the massive wave of offshoring of industry from rich to poor countries that began around 1990) is merely the “second unbundling”, the first unbundling being the rise of international trade enabled by the takeoff of industry in northern Europe after 1820 when the West began to eclipse the rest of the world in productivity.1 This “first unbundling” Baldwin considers to be simply a phase of “proto-globalization,”2 suggesting that both it and what has happened to the global economy since the 1980s are but two stages of the same process. But this narrative doesn’t line up with the facts, for in this conceit Baldwin takes a very different view than that expounded by Alexander Hamilton, the father of American industrial policy. Hamilton’s explicit aim in encouraging manufacturing in the United States was “to render the United States independent on foreign nations for military and other essential supplies.”3 Regarding European industrialization, Friedrich List, the father of German industrial policy in the 19th century, stated “National Economy teaches by what means a certain nation, in her particular situation, may direct and regulate the economy of individuals, and restrict the economy of mankind, either to prevent foreign restrictions and foreign power, or to increase the productive powers within herself.”4 The English beginning with Edward III until 1846 made protection of home industry by tariffs and Navigation Laws the means of successfully attaining to the status of a great power. So Hamilton, List, and the English were not building their national economies so that they could be instrumentalized for the creation of a borderless global community; rather each of these wanted his nation to reach new heights of power and wealth, and to throw off any foreign dependence. From this standpoint the international economy of offshored and scattered productive powers represents a discontinuity from that of industry’s original champions, even an opposite tendency.5
Trade Deficits as Historical Necessity?
Another example of this framing is found in an article published by the Federal Reserve Bank of St. Louis written by Brian Reinbold and Yi Wen, which attempts to contextualize America’s massive trade deficits accumulated under neoliberalism as historically necessary:
Historically, industrialization has three phases: (i) the first industrial revolution features labor-intensive mass production, (ii) the second industrial revolution features capital-intensive mass production, and (iii) the welfare revolution features mass consumption in a financial services-oriented welfare state. We hypothesize that industrialization leads to structural changes that cause a nation's comparative advantages to change relative to those of other nations. Since countries trade based on their comparative advantages, we would expect to see long-term changes to a country's trade as it enters a new stage of development.
During the early 1970s, the U.S. trade balance experienced another inflection point—from trade surpluses to trade deficits—as U.S. financial assets became more attractive to foreign investors. Again, this shift also corresponds with a structural change in the economy as the United States entered the third stage of industrialization.
So the trade deficits resulting from offshoring and the policy of systematic financialization are supposed to be understood as a natural force like continental drift or thunderstorms, not as the deliberate policy of specific groups like the member banks of the Federal Reserve or big Wall Street investment firms whose massive wealth has gained them sway in Congress in favor of deregulation of financial markets and elimination of trade barriers.
It is also rather humorous how the Federal Reserve here glosses over America's excessive consumption made possible only by going into debt: "the United States became able to consume more tangible goods than it produced by providing financial services to the world."
Deindustrialization: The Curse of Success?
The International Monetary Fund employed a similar line of reasoning in a paper intended to downplay the effects of deindustrialization:
An important implication of this analysis is that deindustrialization is not necessarily a symptom of the failure of a country’s manufacturing sector or, for that matter, of the economy as a whole. On the contrary, deindustrialization is simply the natural outcome of successful economic development and is generally associated with rising living standards.
Successful economic development, defined by the IMF as “higher productivity in manufacturing than in services,” has forced workers out of manufacturing, where their labor is no longer needed, into services. There may be a modicum of truth to this claim, but it does not necessitate moving our factories to other countries to take advantage of cheap labor. In fact, a truly innovative nation would make industrial advances work for themselves by finding ways to productively use those workers displaced by increased industrial efficiency by means of greater training, education, and inventions that can accommodate them. There is no reason why American government and businesses cannot use the means at their disposal to change the comparative advantage such that production accumulates in our own high-wage nation, just as the private actors controlling “global supply chains” have taken pains to deliberately keep wages lower in the regions where their production facilities were relocated.6 The non-necessity of offshoring is a fact groups like the IMF shy away from acknowledging, and American productive power is directly lessened by it, while our people languish for lack of meaningful work. But it is not to be expected that advocates of international finance would be overly concerned with the health of the nation as opposed to the freedom of operation for global supply chains.
The IMF also argues that “deindustrialization is primarily a feature of successful economic development and that North-South trade has very little to do with it.” Well, the issue with global North-South trade is not that they're out-competing us but rather that the financial planners of the American economy are simply moving American factories to the "global South." If our country used tariffs and capital control laws we would have no need to fear being undersold by other countries who industrialize, or by nominally American companies who cut costs by relocating. There is no law of nature that demands every sector of every national economy directly compete with that of every other nation. In fact, international competition, by clearing away any and all industries that fall even one half of one percent below par with their foreign rivals in cheapness, paves the way for global centralized control over production. Economists politely refer to this process as the working of “comparative advantage”.
With all this in mind we have to ask ourselves why liberals so frequently premise their apologetics for their policies on historical necessity as opposed to more explicitly economic arguments like consumer purchasing power or the share of wealth controlled by the middle class. Instead they appeal to vague notions of "history," which they go on to tell only from one perspective.
A Morphological Analogy
The above authors assert that these movements toward liberalization and globalization are “natural,” but what does it mean for something to be natural in the context of the outworking of the idea of the nation? Consider a morphological analogy: in the organic development of a living being, like a child, the natural tendency is to grow up physically and mentally and, in the case of a child, become a man. The child needs proper nutrition and activity for physical development, and opportunities to learn and experience life to fulfill his mental and social development. “The child is the father of the man.” If something goes wrong in this process, and the child is malnourished, chronically understimulated, or undisciplined, his physical or mental growth is stunted; and this is against nature, against the natural tendency to reach maturity. Nations in this way are much like living creatures, being the organic body of individuals sharing ethnic and linguistic ties, bounded geographically and united as a single community, having a central point of command in the State. So, for the nation, what is “natural” if not the national body growing up into full strength, possessing all the characteristics of independence of action and completeness of sustenance? For a nation, then, a “natural” development includes the emergence of a national economy, the physical basis of its survival, fully in the possession of domestic elements.7 This outline of the natural development of a nation excludes any sort of colonial dependence beyond a certain stage of advancement, whether overtly political or subtly economic. A nation has not grown up into its full strength if it is reliant on other nations for its food or clothing or for other essential goods like transportation or tools; rather, such a nation’s growth has been stunted, and that against nature.
Liberal internationalism, contrariwise, as expressed by its founders like Alfred Zimmern and Lionel Curtis, is simultaneously individualistic and universalistic in nature. Thus it posits a pattern of development where individuals, as such, are eager to throw off national ties as the removal of an oppressive burden at the first convenient moment to join a global government that is unbounded in jurisdiction, in effect fusing all nations together once they’ve reached a basic level of development. This of course has not happened. But in practice liberalism means complete freedom of markets and capital without respect to national borders. And, if practiced, what does this mean for the growth process described above? It means the home market is open and exposed to all manner of international competition, strangling infant industries in the cradle and permitting free movement of productive capital like particles through a porous membrane. In effect, free trade and globalization deny the nation its due organic growth process, keeping it in a state of arrested development, with no fully expressed national character and dependent on foreign powers and the caprice of importers and financiers who when all else fails find ways to profit from national decline.
The Nationalist Perspective: Man’s Power Over Nature
So nationalists view nature differently than liberals do. But to attack the overarching question of Nature from a slightly different angle, consider Erasmus Peshine Smith, one of the progenitors of what became known as the Pennsylvania School or American School of political economy, who emphasized the power that man has to use the forces of nature as a tool in overcoming the challenges of meeting his physical needs:
We are to regard man then as the lord, not the slave of Nature, but no arbitrary lord—as acting in accordance with fixed laws of his own being, all of which exercise their due force, and none of which are suspended, any more than the law of gravitation, — as securing freedom for that harmonious exercise of all his faculties, in which happiness consists, by means of the intelligence which enables him to apprehend the inevitable necessity that the physical laws must operate, and teaches him how to avoid opposing the irresistible, and how to make it work for him.
"He is the freeman whom the truth makes free,
And all are slaves beside."
If we undertook to deduce the laws of human nature from their manifestations in the action of a single individual, it would end in failure, because no two individuals, to say nothing of original diversities of constitution, are surrounded by the same circumstances. What concerns us, however, in Political Economy, is the conduct of men associated in communities — a conduct springing not from individual will or peculiarities, but from those which characterize the greater part of their members.8
Nationalists like Peshine Smith affirm that man, in the social state, creates and shapes his own environment, the task that God designed him for. Nature is to be acted upon for his benefit, not to fulfill any supposed “natural law” of markets deduced by economists.
So whether the United States proceeds on a path of financialization and free trade, or one of a strong home market and a national community, is a question of national will, and not of natural constraint. Since we are not slaves to nature, our economic and even political policy should be based on careful consideration of real conditions and likely consequences, and be informed by historical precedent; in other words, we must discover what are the truly immutable natural laws at play and what is within our power to change. In a matter as practical and consequential as political economy, it is hard to imagine a path more prudent.
It is worth reconsidering the presuppositions that underlie liberalism, because it was by introducing a new set of these that protectionism fell away from political consciousness. When a certain presidential candidate-become-President shook up Washington with such unheard of nationalist ideas, people thought he made them up himself! It was not by empirical proof that protectionism was delegitimized, for protectionism won out on every metric in terms of national economy. It was not in the realm of theory that free trade won out, for both sides have theories equally plausible in principle (and protection had the advantage of alignment with empirical facts); but it was by simply burying our history and being told to trust disloyal partisans that nationalism was abolished in our hearts. In the New World Order, there is no place for protectionism or strong nation-states. But what if the New World Order was an illusion all along?
“So then,” an inquisitive reader might ask, “how does 18th century nationalism progress into the modern world? What is the telos of nationalism, this breaking of petty tribal bonds to harness and discipline the nation and its potentialities for higher aims, if not to ultimately fuse with other nations of like progress into a global government?” The answer may be found in a deep understanding of the Monroe Doctrine. But more on this another time.
- Richard Baldwin, The Great Convergence: Information Technology and the New Globalization. (Cambridge, Massachusetts: The Belknap Press of Harvard University Press, 2016), p. 4-5, 53.
- Baldwin, The Great Convergence, p. 40.
- Alexander Hamilton, Report on the Subject of Manufactures
- Friedrich List, Outlines of American Political Economy In a Series of Letters. (Philadelphia: Samuel Parker, 1827), Letter I.
- One is amazed reading Baldwin’s book, as it comes across more as an eschatological account of some kind of daemonic force known as the “global supply chain” enveloping the world than any kind of practical economics text. And yet for this reason it is highly suggestive. See p. 8-10, 214-215, and, p. 12: “Staunching the massive ‘knowledge arbitrage’ that is now driving globalization would be next to impossible… With firms mixing and matching different nations’ sources of competitiveness, nations are no longer the only natural unit of analysis. Increasingly, the boundaries of competitiveness are controlled by firms who run international production networks.”
- Baldwin, The Great Convergence, p. 214-215.
- And, just as for the man work is essential in keeping up discipline and purpose in life, so too is a well-ordered national economy essential for a harmonious and stable community that maintains a healthy respect for authority: “a habit of labor in the people is as essential to the health and vigor of their minds and bodies, as it is conducive to the welfare of the state,” Alexander Hamilton to Robert Morris, April 30, 1781 in The Works of Alexander Hamilton, ed. Henry Cabot Lodge, vol. III, p. 387.
- Erasmus Peshine Smith, A Manual of Political Economy (New York: George P. Putman & Co., 1853), p. 17-18.